Theresa May has pulled the trigger and the United Kingdom has officially entered the uncharted territory of Brexit negotiations. In just 9 short months since the referendum, we have seen almost unprecedented pressures on retail pricing and damaging tension between suppliers and retailers.

Volatility is the new ‘normal’

One thing we now know since the prime minister announced her intention to invoke Article 50 is that the European Union is not going to roll over – they are definitely going to fight their corner.

The EU has emphasized that, before any other negotiations begin, there has to be a deal on the £50bn “divorce bill” and the rights of EU citizens in the UK and British citizens in the EU.

With the British government insisting on Brexit going ahead even without a deal many companies are bracing themselves for a tumble over the “cliff edge of uncertainty”. Of course, the threat of a Scottish and/or Northern Ireland independence referendum and dire predictions like the possible loss of up to 250,000 jobs in London if the City loses its EU “passport” might never materialize Tweet This. However, the problem is the volatility that ensues in such a climate and the difficulties it creates for any kind of long-term planning.

Winners and losers

Of course, every crisis presents an opportunity for somebody and a weaker pound is not universal bad news Tweet This. Exporters and multinational companies that get paid in dollars get more bang for their buck when they repatriate it to the UK. Inbound tourism is also likely to rise as holidays become cheaper.

Conversely, foreign holidays for British people become more expensive and there is a lot of pressure on manufacturers as the cost of imported raw materials rises. Companies like Unilever, even though they have a large factory base in the UK, pay for commodities in US dollars. Last October, Michael Saunders, a member of the Bank of England’s Monetary Policy Committee, stated that, with a 20% fall in the price of the pound, “you probably expect (to) see import prices in the U.K. rise perhaps 12-13 percent.”

The double whammy of a falling pound and the extra tariffs and costs related to a hard Brexit would make already difficult trading conditions that much trickier.

So what solutions are available to get us through the difficult times ahead?

Hedging ain’t what it used to be

In relatively stable economic conditions, companies that trade internationally hedge against exchange-rate fluctuations. According to Bloomberg, 80% of the UK’s top 1,000 companies put exchange-rate protection in place prior to the referendum Tweet This. Now that most of these positions have rolled off, businesses face difficult choices: buying ever more expensive hedging, taking a big hit to their profits, or passing the costs on to the consumer.

As we discovered with #MarmiteGate, there is a lot of resistance from retailers to passing the costs onto consumers, particularly as the major UK supermarkets are worried that cost-conscious consumers will switch their loyalty to budget brands like Lidl and Aldi.

Predictive analytics to the rescue!

While we can’t do much about the actual exchange rate, Evo Pricing can use our suite of tools and millions of data sets to analyze the impact of exchange rates on costs and marginality, and their impact on customer elasticity Tweet This.

Being able to predict which prices to raise, hold or lower is very valuable business intelligence, as is the fact that we can help to monitor when your competitors change prices and promotional intensity.

Our aim is to help you, whatever the trading conditions, to optimise price changes to match target margin goals as well as take advantage of opportunities created by changes in customer preference and/or your competition.

So, instead of being a rudderless boat at the mercy of the Brexit storm, you will be the master of your own destiny and able to navigate your business into the calmer waters of profitability and growth.

Are you worried about how the uncertainty around the Brexit will affect your business? Talk to Evo Pricing about the kind of data-driven insights that are already helping companies around the world increase profitability by hundreds of millions of dollars.